Imagine for a moment that your bank is being subjected to a serious or material enforcement action. You are contemplating changing your charter as a result to move to another regulatory authority. Not so fast, says the Federal Financial Institutions Examination Council, better known as the FFIEC. In these turbulent times, the FFIEC recognized that given the current stressed environment, rating downgrades and supervisory actions it is essential that the charter conversions not undermine current or prospective supervisory actions.
The FFIEC purpose is to maintain uniform supervisory principles and standards for all regulated entities, regardless of chartering authority. The FFIEC recently issued a statement in July emphasizing that conversion requests made while there are pending enforcement actions with the current chartering authority should not be entertained.
Chartering conversions are for purposes of business and strategic needs, according to the FFIEC, not for purposes of avoiding enforcement actions.
In the event that a conversion does move forward either through direct conversion or as the result of a merger, the FFIEC recommends:
1. Enforcement actions in place prior to conversion should carry over to the new agency.
2. Current agency should provide prospective agency a summary of existing examination program.
3. If there is not a recent examination to review, the prospective agency should, if deemed necessary, conduct an eligibility examination.
4. Prospective agency should factor existing ratings into their examination planning process as well as in–process ratings downgrades only after the completion of an appropriately scoped on-site examination.
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